SERSTECH AB: Half-year report 1 January – 30 June 2020

Serstech Group -                                                                    Serstech Group –   
Second quarter 2020                                                              Period 1 January – 30 June 2020

Net sales: KSEK 308 (5 089)                                                   Net sales: KSEK 6321 (8 340)
Profit for the period: KSEK -6 820 (-3 349)                              Profit for the period: KSEK -10 025 (-7 008)
Earnings per share SEK -0,10 (-0,05)                                      Earnings per share SEK -0,14 (-0,11)
Earnings per average number of shares: SEK -0,10 (-0,05)    Earnings per average number of shares: SEK -0,14 (-0,11)  

The second quarter was naturally heavily influenced by the ongoing pandemic and our sales was significantly lower than normal. In April and the first half of May, the vast majority of ongoing tenders were either postponed indefinitely or cancelled. In late May and in June, several of the postponed or cancelled tenders were reopened, some end-customers mentioning the reason being an increased narcotics problem in the country. In June, we also noted a significantly higher  activity level among our partners, with customer meetings and demonstrations being possible again in some regions.

The plan and goal for 2020 was to grow our revenue well beyond 100% and we also had high ambitions in our product development roadmap for the year. The plan was to grow our R&D capacity in both Sweden and Romania and double our sales team. As a direct result of the effects from Covid-19, we initiated a cost-cutting program in mid-March. We have asked eleven colleagues to leave the company and managed to achieve an overall fixed cost reduction by more than 60% per month from April to October. The majority of staff reductions has been done in Lund, leaving the team in Cluj Napoca relatively untouched.

The combination of significantly reduced cost and the reopening of some tenders makes us cautiously optimistic that the market will start to normalize in the third or fourth quarter. We expect to be able to maintain a very low cost level until at least the end of the year, partially due to the ongoing reduction in working hours for the Swedish team. Since we do not use our own resources or cash for sourcing and production, our fixed costs will not automatically increase when the volumes start to go up again. We therefore expect to see improvements in our cash flow the coming quarters.  

In April, we announced the new instruments Serstech Arx and Arx+, which are intended for the security and pharmaceutical industry, respectively. The differences between the two instruments are that the Arx+ contains a barcode reader and complies with FDA’s regulations governing the pharmaceutical production industry. Both instruments have our patented autofocus solution, built-in Wi-Fi, next generation analysis algorithms and a completely redesigned hardware and user interface. The new products have created a lot of buzz in the market and positive response from partners and endcustomers. We expect the products to generate initial sales already in Q4 this year, even though the volumes are hard to predict, due to the current market situation.

For most of this year, we have reduced capacity in R&D due to the reduction of the team size and reduced working hours for the remaining team. Nevertheless, we plan to launch ChemDash 2.0 in September and reshape and significantly improve our software offering. The new ChemDash platform, rewritten from scratch, will be introduced in three dif ferent versions – ChemDash Lite, ChemDash Pro and ChemDash Pro+. ChemDash Lite is free and is included with any Serstech instrument and has limited functionality. ChemDash Pro is our first premium software and will be sold with subscription and perpetual license options. ChemDash Pro+ is like Pro but complies with the FDA regulations for the pharmaceutical market. The new ChemDash platform introduces a licensing mechanism, which in the future will allow us to sell subscriptions to updates of our substance libraries. At the moment, the security market does not accept the subscription business model, but we expect that to gradually change over the coming years.

The overall feeling after the end of Q2 is positive and we think that the second half of the year will be better than what we initially feared and prepared for. The cost reductions we have done, in combination with the variety of new products, put us in a good competitive position to quickly resume sales, without adding any fixed cost.

For further information, please contact:

Stefan Sandor,
CEO, Serstech AB
Phone: +46 739 606067
Email: ss@serstech.com

Thomas Pileby,
Chairman of the Board, Serstech AB
Phone: +46 702 072643
Email: tp@serstech.com

Company website: www.serstech.com

This is information that Serstech AB (publ.) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above at 08:45 CET on July 20, 2020.

Certified advisor to Serstech is Västra Hamnen Corporate Finance AB, phone: 040-20 02 50, e-mail: ca@vhcorp.se

About Serstech
Serstech delivers solutions for chemical identification and has customers across the world, mainly in the safety and security industry. Typical customers are customs, police authorities, security organizations and first responders. The solutions and technology are however not limited to security applications and potentially any industry using chemicals of some kind could be addressed by Serstech’s solution. 

Serstech is traded at Nasdaq First North Growth Market and more information about the company can be found at www.serstech.com

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